MR. SIDDARTHA GIRIJASHANKAR ,DEALERS ALDUR V. INCOME TAX OFFICER WARD 1, CHIKMAGALUR , CHIKMAGALUR

ITA 2340/BANG/2025

AI Insights

The case revolves around an appeal by Mr. Siddartha Girijashankar against the order of the National Faceless Appeal Centre (NFAC), which had added Rs. 26,68,790 to his income under section 69A of the Income Tax Act, citing unexplained cash deposits. Mr. Girijashankar, a partner in M/s B.P. Basappa Setty & Sons, argued that these deposits were legitimate business receipts. The Assessing Officer (AO) initially accepted most of the deposits as business-related but questioned the remaining amount due to lack of direct transfers to the firm's accounts. The Tribunal, after reviewing the submissions and evidence, concluded that the entire amount represented business income and not unexplained cash.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 842196 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 18-10-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: REVENUE; GANESH R GHALE; STANDING
• Assessee Lawyers: SIDDESH NAGARAJ GADDI
• Keywords: Set aside; Business income; Income from undisclosed sources; Source of fund; Bogus
• Section: 147; 139; 145

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No. 2340/Bang/2025 Assessment Year: 2016-17 Mr. Siddartha Girijashankar, M/s B.P Basappa Setty & Sons, I.O.C, Dealers Aldur – 577 111. PAN – AMTPG 7959 F Vs. The Income Tax Officer, Ward – 1, Chikmagalur. APPELLANT RESPONDENT Assessee by : Shri Siddesh Nagaraj Gaddi, CA Revenue by : Shri Ganesh R Ghale, Advocate, Standing Counsel for Revenue Date of hearing : 02.02.2026 Date of Pronouncement : 25.02.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The present appeal has been instituted by the assessee against the order of the NFAC, Delhi passed u/s 250 of the Act dt. 26.09.2025 for the AY 2016-17. 2. The interconnected issue raised by the assessee through Ground Nos. 4 to 14 are that the revenue authorities erred in making addition under section 69A of the Act for Rs. 26,68,790/- on account of cash deposits. 3. The facts in brief are that the assessee, an individual and a partner in M/s BP Basappa Setty & Sons which is engaged in the Printed from counselvise.com ITA No.2340/Bang/2025 Page 2 of 11 . business of supplying petrol and petroleum products. For the year under appeal, cash aggregating to Rs. 6,18,28,290/- was deposited in the assessee’s saving bank accounts held with Bank of Broda (Rs. 60,51,230/-) and Canara Bank (Rs. 5,57,77,060/-). However, the assessee has not filed return under section 139 of the Act. Subsequently, the assessment was reopened under section 147 of the Act and assessment order under section 144B r.w.s. 147 of the Act, came to be finalised as on 23rd March 2022 by making an addition under section 69A of the Act for Rs. 6,18,28,290/- only. The dispute reached to the Tribunal and the Tribunal set aside the issue to the file of the AO fresh adjudication. 4. During the fresh assessment proceedings, the assessee submitted that his bank account was utilised by the firm M/s BP Basappa Setty & Sons in which he is a partner. The cash deposits are business proceeds of the firm which were utilised for making payments toward purchases or payment toward overdraft facilities availed by the firm. The assessee in support furnished copy of cash book of the firm, audited balance sheet, audit report in Form 3CB, Trading and profit loss account, Bank Statement, Indian Oil Account. 5. The assessee further submitted that the firm has reported total sales of Rs. 7.56 crore against the purchases of 7.30 crore which resulted gross profit ratio of 2.64%. The gross profit ratio reported by the firm is in an acceptable range of GP ratio in the business of retail sale of petrol and petroleum products. It was submitted that the entire purchase was made from Government PSU i.e. India Oil Corporation Ltd- IOC. 5.1 The assessee argued that the cash deposited during the year is not exceeding the sales reported by the firm. Further, the cash Printed from counselvise.com ITA No.2340/Bang/2025 Page 3 of 11 . deposited were utilised for financing the purchases by way of making payment to IOC directly or indirectly through transferring the amount into OD account of the firm. 5.2 It was also argued that assessee being managing partner of the firm has no other sources of income except the business carried out through the firm. The firm account is audited wherein cash deposit in personal account of assessee is considered. 5.3 However, the AO on verification, observed that both the savings bank accounts were in the individual name of the assessee. Further, the Bank of Baroda account No. 10582 was not reflected in the audited balance sheet of the firm. The balance sheet of the firm showed only limited bank balances and one OD account and did not include the said savings account as part of the firm’s assets. 5.4 The AO further found that the cash book submitted in excel format, not maintained in proper accounting format. Important details such as dates, narration, opening and closing balances and running balances were missing. This created serious doubt about the reliability and correctness of the books of account. During the video conference held on 22.11.2024, the representative of the assessee admitted discrepancies in the cash book and balance sheet of the firm and stated that the accounts of the firm were not audited properly. No satisfactory documentary evidence was produced to establish the source of the cash deposits. 5.5 On detailed examination, it was found that out of total cash deposits of Rs. 6,18,28,290/-, a sum of Rs. 2,12,79,000/- was transferred to Indian Oil Corporation and Rs. 3,78,80,500/- was transferred to the firm’s current account. The balance amount of Rs. 26,68,790/- remained unexplained in the individual savings bank account Printed from counselvise.com ITA No.2340/Bang/2025 Page 4 of 11 . of the assessee. Hence the AO, held that the assessee failed to establish with proper evidence that the said balance amount represented business receipts of the firm. The books of account of the firm were also found to be unreliable and not properly maintained. Therefore, the amount of Rs. 26,68,790/- was treated as unexplained cash deposit in the hands of the assessee and added to his total income under section 69A of the Act. 6. The aggrieved assessee preferred an appeal before the learned CIT(A). 7. Before the learned CIT(A), the assessee submitted that he is the Managing Partner of M/s B.P. Basappa Shetty & Sons, a firm engaged in the business of retail sale of petroleum products as an authorized dealer of Indian Oil Corporation Limited (IOCL). The nature of this business is predominantly cash-based, as customers make payments in cash for purchase of petrol and diesel. During the relevant year, a total sum of Rs. 6,18,28,290/- was deposited in the savings bank accounts standing in the name of the assessee. These deposits represent business receipts of the firm and not the personal income of the assessee. 7.1 Out of the total deposits, Rs. 5,91,59,500/- has already been accepted by the AO as genuine on the ground that the same was transferred to IOCL and to the firm’s bank account. The balance amount of Rs. 26,68,790/- has been treated as unexplained merely because it was not transferred further to IOCL or to the firm’s account. The assessee submits that such differentiation is arbitrary. Once the source of the deposits has been accepted as business receipts, merely because a portion was retained or utilized differently does not make it unexplained income. 7.2 The entire cash deposited was generated from recorded sales of petrol and diesel by the firm. The books of account of the firm, which Printed from counselvise.com ITA No.2340/Bang/2025 Page 5 of 11 . are duly audited, reflect these sales. The assessee has furnished copies of the firm’s audit report, profit and loss account, balance sheet, cash book, bank statements and IOCL statements to establish the source and utilization of funds. The cash flow has been explained in detail. The addition has been made without properly appreciating these documents. The AO has observed that deposits relating to the firm cannot be routed through the personal bank account of a partner. The assessee submits that there is no provision under the Income-tax Act prohibiting such routing of funds. A partner is an agent of the firm and may operate bank accounts for business purposes. Due to practical and business constraints, certain deposits were made in the personal savings account and later transferred to IOCL and to the firm. This does not change the character of the receipts. 7.3 It is further submitted that section 69A of the Act applies only where money is found to be unexplained and not recorded in the books of account. In the present case, the nature and source of the deposits have been clearly explained as business receipts of the firm and are duly reflected in the books. The primary onus cast upon the assessee has been discharged by furnishing documentary evidence. No material has been brought on record by the AO to prove that the impugned amount represents income from undisclosed sources. 7.4 The assessee also submits that the addition has been made without proper consideration of submissions and evidence placed on record. Part of the deposits has been accepted as genuine, and the remaining portion has been added without any specific finding that the source is different. Such selective treatment of the same stream of deposits is not justified. Printed from counselvise.com ITA No.2340/Bang/2025 Page 6 of 11 . 7.5 In view of the above facts and explanations, the assessee submits that the entire cash deposits are attributable to legitimate business transactions of the firm. The addition of Rs. 26,68,790/- under section 69A is therefore liable to be deleted. 7.6 However, the learned CIT(A) confirmed the addition made by the AO by observing as under: 6.1. On going through the submission of the assessee, it can be seen that the assessee had deposited cash amounting to Rs.6,18,28,290/- in savings bank account and out of the same a sum of Rs.2,12,79,000/- were being transferred to the Indian Oil Company and Rs.3,78,80,500/- to the firm’s current account and the balance amount of Rs.26,68,790/- deposited as cash.) In respect of the aforesaid contention the assessee was required to submit with proper documentary evidences in support of its claim of having made cash deposits in the firms account which the assessee failed to submit during the appellate proceedings. On going through the submission of the assessee, it can be seen that the assessee has stated that he had deposited the said amount in his account without any documentary evidences and no justification was given by the assessee for justification of the same. 6.2. Further, it can be seen that the assessee in its submission has stated that the assessee had deposited the cash and had transfer to Indian oil Corporation Ltd. and M/s. B.P. Basappa Setty and Sons. However, on verification of the submission it can be seen that the assessee has merely stated the same without any documentary evidences Further, the assessee failed to submit the receipts/bills/vouchers in respect of the business of having received the cash from the business and not from any other source. The assessee would have submitted the documentary evidences in respect of the difference amount of Rs.26,68,790/- which the assessee failed to provide during the assessment as well as appellate proceedings. 6.3. Therefore, I do not find any excuse to take a divergent view from the findings of the AO as the documentary evidences in support of the cash deposits made amounting to Rs.26,68,790/- were not submitted by the assessee during the assessment as well as appellate proceedings. In view of this fact, the addition made by the AO of Rs.26,68,790/- is hereby confirmed and the ground of appeal No.3 to 9 raised by the assessee are hereby dismissed. 8. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 9. The learned AR before us filed a paper book running from pages 1 to 103 and submitted that the assessee is the Managing Partner of M/s B.P. Basappa Setty & Sons, which is engaged in the retail sale of petrol and diesel. This type of business is mainly cash-based, as customers Printed from counselvise.com ITA No.2340/Bang/2025 Page 7 of 11 . generally make payment in cash. During the year, a total sum of Rs. 6.18 crore was deposited in the savings bank accounts standing in the name of the assessee. It was argued that these deposits were not the personal income of the assessee but represented business collections of the firm. 9.1 The learned AR further submitted that out of the total deposits, Rs. 2.12 crore was transferred to Indian Oil Corporation Ltd. towards purchase payments and Rs. 3.78 crore was transferred to the firm’s bank account. The Assessing Officer has already accepted this major portion of Rs. 5.91 crore as genuine business transactions. Therefore, it was contended that the remaining amount of Rs. 26.68 lakh, being part of the same business receipts, cannot be treated as unexplained merely because it was not transferred further. 9.2 It was also argued that the firm had reported total sales of Rs. 7.56 crore with a gross profit ratio of 2.64%, which is reasonable in this line of business. The books of account are audited and the sales and purchases are properly recorded. The learned AR submitted that there is no prohibition under the Income-tax Act against routing business funds through the personal bank account of a partner. Since the source of the deposits has been explained as business receipts, section 69A of the Act cannot be applied. Accordingly, the addition of Rs. 26.68 lakh deserves to be deleted. 10. On the other hand, the learned Departmental Representative supported the orders of the lower authorities. It was submitted that the bank accounts in which the cash was deposited were standing in the individual name of the assessee and not in the name of the firm. Further, one of the savings bank accounts was not reflected in the Printed from counselvise.com ITA No.2340/Bang/2025 Page 8 of 11 . audited balance sheet of the firm, which creates doubt about the claim that the deposits belonged to the firm. 10.1 The learned DR also submitted that the cash book produced by the assessee was not properly maintained and lacked important details such as dates, narration and running balances. The assessee had admitted discrepancies in the books and stated that the accounts were not properly audited. No proper bills, vouchers or documentary evidence were produced to explain the specific amount of Rs. 26.68 lakh. Therefore, since the assessee failed to satisfactorily explain the source of this amount, the Assessing Officer was justified in making the addition under section 69A and the order of the CIT(A) deserves to be confirmed. We have heard the rival contentions of both the parties and perused the materials available on record. The limited issue before us is whether the addition of Rs. 26,68,790/- made under section 69A of the Act is justified in the given facts and circumstances. 11. The facts are not in dispute. The assessee is a partner in M/s B.P. Basappa Setty & Sons, had cash deposits of Rs. 6,18,28,290/- in his savings bank accounts. Out of this amount, Rs. 2,12,79,000/- was transferred to Indian Oil Corporation Ltd. and Rs. 3,78,80,500/- was transferred to the firm’s current/OD account. The balance amount of Rs. 26,68,790/- was treated by the Assessing Officer as unexplained and added under section 69A of the Act. 11.1 It is an admitted position that the AO himself has accepted that the major portion of the deposits, aggregating to Rs. 5,91,59,500/-, represents business transactions, since the same has been transferred either to IOCL or to the firm’s bank account. Once the source of the larger part of the deposits is accepted as business receipts of the firm, it Printed from counselvise.com ITA No.2340/Bang/2025 Page 9 of 11 . is not logical to treat the remaining portion of the same stream of deposits as unexplained without bringing any positive material on record. The assessee has consistently contended that he is the Managing Partner of the firm engaged in the retail sale of petroleum products. This line of business is predominantly cash based. The firm has reported sales of about Rs. 7.56 crores with a gross profit ratio of 2.64%, which has not been disturbed by the Department. The purchases are made from a Government PSU, i.e., Indian Oil Corporation Ltd. The sales and purchases are duly recorded in the books of account of the firm, which are audited. 11.2 The assessee has furnished the firm’s cash book, audited financial statements, bank statements and IOCL account to demonstrate that the cash deposits are relatable to business receipts. The Revenue has not rejected the books of account of the firm under section 145 of the Act, nor has it brought any material to show that the sales recorded by the firm are inflated or bogus. In such a situation, it is not open to the Department to accept the business model for a substantial part of the deposits and reject it selectively for a small balance amount. 10.5 The objection of the AO and the learned CIT(A) that the savings bank account stands in the individual name of the assessee does not, by itself, lead to the conclusion that the deposits represent unexplained money. A partner is an agent of the firm and may, in practical business circumstances, route business receipts through his account. There is no statutory bar under the Income-tax Act prohibiting such routing. What is relevant is the source of the money and not merely the name in which the bank account is maintained. 11.3 Further section 69A of the Act can be invoked only when money is found in the possession of the assessee and the assessee offers no Printed from counselvise.com ITA No.2340/Bang/2025 Page 10 of 11 . explanation about the nature and source thereof, or the explanation offered is not satisfactory. In the present case, the assessee has offered a plausible and consistent explanation that the deposits represent business receipts of the firm. The explanation is supported by books of account, sales figures and corresponding transfers to IOCL and the firm’s bank account. The Revenue has not brought any independent evidence to show that the impugned sum of Rs. 26,68,790/- has any source other than the business of the firm. 11.4 The learned CIT(A) has confirmed the addition mainly on the ground that specific documentary evidence was not furnished for the differential amount. However, once the overall cash flow and business nexus are demonstrated, and the Department has accepted the same pattern of deposits for the larger amount, the burden shifts to the Revenue to establish that the balance amount is from some undisclosed source. No such finding or material is available on record. 11.5 Furthermore, it is also noted that the assessee has claimed cash amounting to Rs. 24,93,672/- was withdrawn from impugned bank accounts and payment to another vendor for Rs. 1,18,605 was also made. This cash withdrawal shows the availability of the funds with the assessee. Thus, in our considered view, the addition has been made merely on suspicion and on a technical distinction between the amount transferred and the amount retained, without disproving the core explanation of the assessee. Taxation cannot be based on conjectures. When the nature of the entire deposits is shown to be business receipts and no contrary material is brought on record, the addition under section 69A of the Act cannot be sustained. Accordingly, we hold that the addition of Rs. 26,68,790/- made under section 69A of the Act is not Printed from counselvise.com ITA No.2340/Bang/2025 Page 11 of 11 . justified on the facts of the case. The same is hereby deleted. The grounds raised by the assessee on this issue are allowed. 12. Coming to the other grounds of appeal bearing Nos. 1 to 3, since the assessee has succeeded on the merit of the case, we do not want to indulge in such grounds of appeal. As such, we hold these grounds as infructuous and accordingly we dismiss the same. 13. In the result, the appeal of the assessee is hereby partly allowed. Order pronounced in court on 25th day of February, 2026 Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 25th February, 2026 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore Printed from counselvise.com "